Exhibit 14-3 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)

question 110

Multiple Choice

Exhibit 14-3
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)
The following information is provided in the context of a two period (two six month periods) binomial option pricing model. A stock currently trades at $60 per share, a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15% or fall by 15% during each six month period. The one-year risk free rate is 3%.
-Refer to Exhibit 14-3. Calculate the price of the call option after the stock price has already moved down in value once (C_d) .

• A) $7.77
• B) $14.35
• C) $0
• D) $4.21
• E) $6.44

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Definitions:

Container

In programming, an object that holds and manages multiple other objects or data types in various structures like arrays, lists, or GUI components.

UML Class Diagram

A type of static structure diagram in the Unified Modeling Language that describes the structure of a system by showing the system's classes, attributes, operations, and relationships among objects.

Sphere

A three-dimensional geometric shape that is perfectly round and symmetrical, with every point on its surface equidistant from its center.

UML Class Diagram

A type of static structure diagram in the Unified Modeling Language that describes the structure of a system by showing the system's classes, attributes, operations, and the relationships among objects.